Business Restructuring Review Vol. 24 No. 6 | November–December 2025
In This Issue:
New York Bankruptcy Court Rejects Challenge to Barnet Rule Permitting Foreign Debtors to Obtain Chapter 15 Recognition With Only Minimal U.S. Assets
Court disagree over whether, to be eligible for relief under chapter 15 of the Bankruptcy Code, a foreign debtor must satisfy the requirement in the Bankruptcy Code applicable to cases under other chapters that the debtor must reside, or have a place of business or property, in the United States. In 2013, the U.S. Court of Appeals for the Second Circuit staked out its position on this issue in Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir. 2013), ruling that the provision of the Bankruptcy Code requiring U.S. residency, assets, or a place of business applies in chapter 15 cases as well as cases filed under other chapters. In 2024, the U.S. Court of Appeals for the Eleventh Circuit ruled to the contrary in In re Al Zawawi, 97 F.4th 1244 (11th Cir. 2024), thereby creating a rift in the circuits on the issue. Bankruptcy courts in the Second Circuit have uniformly toed the line established by Barnet and refined its rationale to mean that an otherwise qualifying foreign debtor need only have a minimal amount of U.S. property—such as a U.S. bank account—to be eligible for chapter 15 relief. For example, in In re B.C.I. Finances Pty Limited, 671 B.R. 669 (Bankr. S.D.N.Y. 2025), the U.S. Bankruptcy Court for the Southern District of New York rejected a challenge to the Barnet approach, ruling that an attorney retainer account in a U.S. bank made a foreign debtor eligible for chapter 15 relief. According to the court, easy access to chapter 15 is consistent with both the plain language of the Bankruptcy Code and the purposes and policies underpinning chapter 15. [read more …]
Delaware Bankruptcy Court: No Legal Authority for Chapter 11 Plan Gatekeeping Provision
In In re AIO US, Inc., 2025 WL 2426380 (Bankr. D. Del. Aug. 21, 2025), stay pending appeal denied, 2025 WL 3036740 (Bankr. D. Del. Oct. 30, 2025), the U.S. Bankruptcy Court for the District of Delaware addressed whether a "gatekeeping" provision in a chapter 11 plan requiring court approval before suing designated non-debtors is permissible. The bankruptcy court ruled that the plan's gatekeeping provision, which barred any claim that "could be reasonably understood" to violate an exculpation provision in the plan and provided that any precluded claim could be asserted only if the court found the claim to be "colorable" on the merits, was not authorized by the Bankruptcy Code and had to be removed from the plan. [read more …]
Liability Management After ConvergeOne: Equal Treatment, Exclusive Opportunities, and the Next Phase of "Lender-on-Lender" Warfare
Section 1123(a)(4) of the Bankruptcy Code provides that a chapter 11 plan shall "provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest." In In re Ad Hoc Group of Excluded Lenders, No. 4:24-cv-02001 (S.D. Tex. Sept. 25, 2025) (Dkt. 54), appeal filed, No. 4:24-cv-02001 (S.D. Tex. Oct. 22, 2025), and appeal filed, No. 4:24-cv-02001 (S.D. Tex. Oct. 24, 2025), the U.S. District Court for the Southern District of Texas reversed a bankruptcy court's order confirming a prepackaged chapter 11 plan. The district court concluded that the plan did not provide equal treatment to second-lien creditors that were not permitted to participate with similarly classified first-lien creditors in "backstopping" an equity offering, thereby giving the first-lien creditors a 30% greater recovery, but instead had the right to propose an alternate plan. The district court found that the plan violated section 1123(a)(4), because, among other things, the debtor failed to perform a market test for the value of the consideration given in connection with the backstop. [read more …]
First Impressions: Eleventh Circuit Rules that Annulment of Automatic Stay Does Not Violate U.S. Supreme Court's Prohibition of Nunc Pro Tunc Orders
After the U.S. Supreme Court in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, 589 U.S. 57 (2020) ("RCA"), circumscribed the use of nunc pro tunc ("now for then") orders that make relief ordered by a court apply retroactively to an earlier point in time, the continued use of such orders in bankruptcy cases became an open question. Lower courts have largely distinguished RCA, particularly in cases involving retroactive approval of professional retention application or nunc pro tunc modification of the automatic stay where such relief does not result in the imposition of jurisdiction retroactively in cases where it did not exist previously—the gravamen of the Supreme Court's ruling in RCA. The U.S. Court of Appeals for the Eleventh Circuit weighed in on this issue as a matter of first impression in In re Patel, 142 F.4th 1313 (11th Cir. 2025). The court of appeals affirmed rulings annulling the automatic stay to validate a post-bankruptcy state court order confirming an arbitration award against the debtor, even though the order was technically void when entered due to the automatic stay. According to the Eleventh Circuit, annulling the automatic stay, which is specifically authorized by the Bankruptcy Code, did not run afoul of RCA, where a federal district court ruled that an order purporting retroactively to confer jurisdiction on a Puerto Rico trial court order was improper because the trial court never had jurisdiction to enter the order when it was issued because the litigation had been removed to the district court. [read more …]
Third Circuit: Plan and Confirmation Order in Closed Chapter 11 Case Barred Environmental Claims Against Former Affiliate of Debtor
In In re Congoleum Corp., 149 F.4th 318 (3d Cir. 2025), the U.S. Court of Appeals for the Third Circuit reconsidered whether it was appropriate to reopen a chapter 11 case that had been closed for more than a decade to determine whether environmental claims asserted against one of the debtor's former affiliates, based upon the debtor's use of asbestos in its flooring products, were barred by the order confirming the debtor's chapter 11 plan. A divided three-judge panel of the Third Circuit ruled that the bankruptcy court properly reopened the debtor's chapter 11 case and had subject matter jurisdiction to do so even though the order confirming the debtor's plan had been issued by a district court, rather than the bankruptcy court. The majority also found no fault with the bankruptcy court's determinations that: (i) the party opposing reopening of the bankruptcy case had adequate notice of and was bound by provisions in the plan and confirmation order stating that the former affiliate was never liable for the debtor's environmental liabilities; and (ii) the terms of the plan were not a third-party release that violated the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. [read more …]
Iowa District Court: Avoidance Claims Cannot Be Encumbered by Pre-Bankruptcy Liens
Causes of action for avoidance and recovery of preferential, fraudulent, or unauthorized transfers are an indispensable means of generating value for the benefit of the estate and creditors in a bankruptcy case. For this reason, many courts are skeptical of efforts to encumber avoidance actions so that a single creditor or creditor group derives the benefit of such claims to the detriment of other creditors. The U.S. District Court for the Northern District of Iowa addressed this issue in Keystone Savings Bank v. Hanrahan, 2025 WL 2014326 (N.D. Iowa July 17, 2025). Applying the rationale universally accepted by other courts, the district court affirmed a bankruptcy court's determination that bankruptcy avoidance claims are not subject to a prepetition lender's liens on "proceeds" or "general intangibles," even if the debtor may have had some "inchoate interest" in such avoidance actions prior to filing for bankruptcy. [read more …]
Newsworthy
In September 2025, Dan T. Moss (Washington/New York) was invited to be a Fellow in the American College of Bankruptcy, which was established in 1989 as an honorary public service association for both U.S. and international insolvency professionals. Membership as a Fellow is extended to individuals who demonstrate exceptional expertise, leadership, integrity, professionalism, scholarship, and a commitment to serving the bankruptcy and insolvency field as well as their communities. He joins other current Jones Day Fellows Heather Lennox (Cleveland/New York), Corinne Ball (New York), Bruce Bennett (Los Angeles), Carl E. Black (Cleveland), Gregory M. Gordon (Dallas), and Kevyn D. Orr (Washington).
Jones Day received a Tier I Ranking in "Worldwide—Corporate Restructuring" in the 2025 edition of Legal 500.
Corinne Ball (New York) and Bruce Bennett (Los Angeles) were designated "Hall of Fame" attorneys in the field "Restructuring (Including Bankruptcy): Corporate" in the 2025 edition of Legal 500. Heather Lennox (Cleveland/New York) received a "Leading Lawyer" designation. Other ranked lawyers included Jasper Berkenbosch (Amsterdam), Fabienne Beuzit (Paris), Roger Dobson (Sydney), Vinay Kurien (Singapore), Ben Larkin (London), and Sion Richards (London).
Caitlin K. Cahow (Atlanta/Chicago) was honored among the American Bankruptcy Institute's "40 under 40" for 2025, a group consisting of 40 individuals under the age of 40 who demonstrate remarkable ability, leadership, and achievement in the bankruptcy and insolvency community. The honorees are distinguished by professional achievements and service and are selected by a group of experienced insolvency professionals.
Christine Borries (Munich) was named a 2026 "Top Lawyer" in the field of Insolvency and Restructuring law by Germany's F.A.Z. Institute.
An article written by Dan B. Prieto (Dallas) titled "Fifth Circuit Reins in Bankruptcy Court Gatekeeping in Chapter 11 Plans" was published in the September 2025 edition of the INSOL News Update.
An article written by Corinne Ball (New York) titled "Second Circuit Rules 300 Lawsuits Brought by Liquidator for Offshore Madoff Feeder Fund Barred by Bankruptcy Code" was published in the August 27, 2025, edition of the New York Law Journal.
An article written by Corinne Ball (New York), Dan T. Moss (Washington/New York), David S. Torborg (Washington), and Ben Rosenblum (New York) titled "Second Circuit Rules that Bankruptcy Code's Securities Transactions Safe Harbor Bars Foreign Common-Law Claims in Chapter 15 Case" was published on September 24, 2025, by Lexis Practical Guidance.
An article written by Corinne Ball (New York), Heather Lennox (Cleveland/New York), Dan T. Moss (Washington/New York), and Nicholas J. Morin (New York) titled "Gap Period Injunctive Relief Warranted in Chapter 15 Case Where Recognition of Canadian Receivership Likely Based on U.S. Debtors' Receivership Activities" was published on September 24, 2025, by Lexis Practical Guidance.
An article written by Jeffrey B. Ellman (Atlanta) titled "Proposed DIP Financing and Sale Framework for Administratively Insolvent Debtors Did Not Violate Jevic's Prohibition of Priority-Deviating Distributions" was published on September 23, 2025, by Lexis Practical Guidance.
An article written by Dan B. Prieto (Dallas) titled "Third Circuit Largely Upholds Order Confirming Boy Scouts Chapter 11 Plan" was published on September 23, 2025, by Lexis Practical Guidance.
An article written by Corinne Ball (New York), Dan T. Moss (Washington/New York), David S. Torborg (Washington), and Ben Rosenblum (New York) titled "Breaking New Ground: Second Circuit Rules that Bankruptcy Code's Securities Transactions Safe Harbor Bars Foreign Common Law Claims in Chapter 15 Case" was published in the October 2025 edition of the INSOL News Update.
An article written by Daniel J. Merrett (Atlanta) and Ashton T. Williams (Atlanta) titled "Delaware Bankruptcy Court Allows Trustee to Pursue Recovery of Fraudulent Transfers for the Sole Benefit of Subordinated Claimholders" was published in the October 2025 edition of the INSOL News Update.
Lawyer Spotlight: Brad B. Erens
Brad Erens, who oversees the Business Restructuring & Reorganization team in Jones Day's Chicago Office, has advised corporate clients for more than three decades in complex and cutting-edge chapter 11 cases. His many engagements include: Aldrich Pump and Murray Boiler (company), Boscov's Department Stores (company), Detroit (debtor), FTD Company (company), General Growth Properties (DIP lender), Harry & David (company), LTL Management/Red River (company), NRG Energy (company), Penton Media (company), Tribune Company (Special Committee of Board of Directors), and USG Corporation (company).
Brad is recognized yearly by Chambers USA (2009–2024) and Illinois Super Lawyers (2006–2025), and he is rated one of the best bankruptcy lawyers in Chicago by the PLC Cross-border Restructuring and Insolvency Handbook.
